Implementing the International Standard on Quality Management 1 (ISQM 1) entails a comprehensive risk assessment process, which can be particularly daunting for small practices. Peter Hollis of Hollis and Co Limited shares insights into identifying and mitigating quality risks relevant to such firms.The process begins with defining quality objectives as mandated by ISQM 1, followed by identifying what could potentially hinder achieving these objectives. Even for small practices, where close involvement in audit tasks might seem to cover all bases, documenting these risks is crucial.
Hollis outlines common quality risks that small practices may face, along with strategies to mitigate them. These include ensuring compliance with UK GAAP, Company Law, ISAs, ICAEW Regulations, and FRC Ethical Standards through staff training and the use of audit systems and checklists. He also addresses the risk of unilateral leadership by promoting open discussions and mutual decision-making.
Skills gaps in staff who manage quality-related tasks are another concern. Hollis suggests annual performance monitoring, file reviews, and tailored continuing professional development (CPD) to equip staff appropriately. Anticipating and planning for resource needs is also crucial to maintain engagement quality.
Ethical breaches are mitigated by thorough client engagement procedures, annual reviews of ethical requirements, and ongoing staff education on independence and prohibited investments. Client confidentiality is protected through contractual obligations, regular affirmations, secure IT systems, and controlled access to premises and sensitive information.
Sufficient audit fees, adherence to firm procedures and laws, and the application of professional skepticism are managed through contractual billing, principal oversight, and rigorously designed audit procedures. Recording all audit work is ensured by adherence to the audit manual, principal reviews, and cold file reviews to prevent systemic issues.
Hollis concludes by encouraging practitioners to begin the risk assessment process, emphasizing that while it may seem daunting at first, progress becomes more apparent once the initial steps are taken.
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